A lack of credit or the inability to build a credit history has the ability to destroy an individual’s chance at upward financial mobility. Today, a person without good credit gets penalized in almost every aspect of his or her financial existence. The penalties include higher interest rates because these individuals represent an increased risk when borrowing, as well as increased insurance rates, less access to rental housing, and the potential of lost employment opportunities. Worse yet, some will be punished by the inability to even obtain insurance or put a roof over their heads. Without a good credit history, the opportunity to improve one’s personal financial standing becomes daunting at best, and sadly, impossible for all too many income-challenged Americans.
Most consumers have brought about their credit problems by their own actions, including nonpayment of their obligations, and it is prudent to document this information for future prospective creditors as a way to protect the system for all Americans. Some consumers, however, are victims of errors in a system seemingly designed to hinder their efforts to make corrections. As you will read in the symposium articles, many consumer advocates believe the system is set up to hold back certain consumers from advancement. These advocates believe the credit scoring system is biased and filled with errors. They believe that the credit reporting system itself is biased by design, promotes disparate impact, and only provides fair representation to those who already have credit. There are certainly elements of the current credit reporting system that prompt debate, especially aspects related to the recent evolution of the system in place today, and we will address these issues. . .